By
Robert
Reich
According to the New York Times, Donald
Trump declared a $916 million loss on his 1995 tax returns – which could have
allowed him to legally avoid paying any federal income taxes for 18 years.
The loss stemmed from Trump’s investments in the early 1990s.
Ordinary investors in Trump’s business empire saw the value of
their shares plunge to 17 cents from $35.50, bondholders got pennies on the
dollar, and scores of contractors went unpaid.
But Trump got a bonanza because the tax code allows “net
operating losses” to cancel out taxable income in future years. And the
bankruptcy code allows wealthy people to stiff the people they owe by
reorganizing their debts under Chapter 11.
Trump didn’t do anything illegal. Real estate losses are
notoriously easy to create. Trump bought buildings with borrowed money. He
could then deduct interest paid on that debt. On top of that, he could take
depreciation deductions, even when his real estate was appreciating in value.
Presto! Trump claimed almost a billion dollars of losses that
would cancel his gigantic income gains for years to come.
Bankruptcy is also easy to utilize, if you’re wealthy enough to find a good bankruptcy lawyer who can use the bankruptcy code repeatedly to shelter your fortune and avoid paying your debts. Trump has used bankruptcy to stiff his creditors at least four times.
“As a businessman and a very substantial donor to very important
people, when you give, they do whatever the hell you want them to do,” Trump told The Wall Street Journal in July 2015. “As a businessman, I need that.”
Trump isn’t and was never a smart businessman. He was and is
smart at gaming the system. There’s a difference.
ROBERT B. REICH is Chancellor's Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies. He served as Secretary of Labor in the Clinton
administration, for which Time Magazine named him one of the ten most effective
cabinet secretaries of the twentieth century. He has written fourteen books,
including the best sellers "Aftershock", "The Work of
Nations," and "Beyond Outrage," and, his most recent,
"Saving Capitalism." He is also a founding editor of the American
Prospect magazine, chairman of Common Cause, a member of the American Academy
of Arts and Sciences, and co-creator of the award-winning documentary,
INEQUALITY FOR ALL.
